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Econ 101 for Presidential Candidates

Cato Recent Op Eds - Thu, 09/29/2016 - 08:39

Daniel R. Pearson

The protectionist trade policies espoused by Donald Trump and Hillary Clinton, on display once again in this week’s presidential debate, demonstrate how little they understand about economics.

Economics is not hard; it’s just that key concepts are politically inconvenient. Here’s a remedial lesson in the economics of trade.

All resources are scarce; demand and supply determine their value. Gravel and gold both have limited supplies. A pound of gold has a higher price than a pound of gravel because the supply of gold is scarcer relative to its demand.

Markets are more effective than governments at setting prices. Adam Smith’s “invisible hand” operates through supply and demand to establish prices and allocate resources. In a free marketplace, millions of individuals strive to maximize well-being by producing goods or services, then buying other goods and services that they want. Free trade promotes economic growth by ensuring that scarce resources are put to their highest-value uses. Governments that use trade restrictions to control markets will cause resources to be used less efficiently, thus making their people unnecessarily poorer.

Costs outweigh benefits for a country imposing import restrictions. Because domestic consumption has included imports, domestic producers have supplied less than 100 percent of consumer demand. An increase in the cost of the restricted product will be paid by all users, but any benefit to domestic producers will only apply to the portion of the marketplace that they serve. Trade restrictions reduce economic welfare.

The major party presidential candidates would be well advised to reconsider their trade policy proposals.

Comparative advantage still works in the 21st century. Countries, like individuals, are better at doing some things than others. The concept of comparative advantage explains that neither individuals or nations should seek self-sufficiency, because not everyone or every country can do everything well. The better approach is for people to specialize in activities at which they are most productive, then trade to obtain other needed goods and services. The United States is better off importing tropical bananas than trying to grow them here in greenhouses.

People deserve the freedom to buy from and sell to whomever they choose. The United States is a free society with relatively open and competitive markets, which enables people to enjoy the fundamental human right to engage in commerce. Any governmental limitation of that right should only be imposed to serve an essential societal objective, such as preventing the export of sensitive military equipment to enemy nations.

Imports are good. They help ensure that people benefit from a wide variety of competitively priced items, thus expanding consumer choice and raising living standards. Half of all imports are used as inputs in manufacturing; those imports contribute significantly to the success of the manufacturing sector. Value added to the economy by U.S. manufacturers hit $2.4 trillion in 2015, its highest level in history. Imports also provide competition for domestic businesses, stimulating innovation and product improvements.

Exports also are good. They are needed to pay for imports. And, since comparative advantage means that all nations are relatively better at doing some things than others, the United States has an obligation to allow its products and services to be exported so that other people will be able to buy them.

Both imports and exports lead to expanded employment. They do this indirectly by improving resource allocation and facilitating economic growth.

But what about people who might lose their jobs due to import competition? A recent study by the Center for Business and Economic Research at Ball State University found that 13 percent of manufacturing job losses have been due to trade, but 85 percent of the employment decline has been caused by automation related to robots and computers. Policies that provide adjustment assistance to unemployed workers should be structured in ways that don’t restrict trade.

The major party presidential candidates would be well advised to reconsider their trade policy proposals. Protectionism will undermine the freedoms of Americans and lower their standards of living. Bad policy choices mean bad economic outcomes. This is not the way to lead a great nation forward.

Daniel Pearson is a senior fellow at the Cato Institute.

Can We Close The Black Economic Gap?

TownHall Latest columns - Thu, 09/29/2016 - 08:35
After watching part of the presidential debate; I asked myself that question. While the economy has recovered significantly from the Great Recession of the late 2000s, a disturbing trend is emerging. According to the Brookings Institute, 9 million men between the ages of 25 and 54 are still not working. 2016-09-28T13:02:00-04:00 2016-09-29T13:35:12Z Harry R. Jackson, Jr.

'New low': Dead vets left to 'decompose' in VA morgue for weeks without burial

Fox News (Politics) - Thu, 09/29/2016 - 07:18
Unclaimed bodies of American veterans are sitting inside a morgue at an Illinois VA hospital for weeks on end – so long that in at least one case, a body had started to liquefy – according to whistleblower documents and accounts shared with FoxNews.com.

Feds spend $$ studying if college kids eat junk food when they drink

Fox News (Politics) - Thu, 09/29/2016 - 07:07
The National Institutes of Health is spending over $50,000 to study whether college students eat junk food when they drink.

Gary Johnson has 'Aleppo moment' when asked about his favorite foreign leader

Fox News (Politics) - Thu, 09/29/2016 - 02:16
Libertarian presidential candidate Gary Johnson said he was having another “Aleppo moment” after drawing a blank when he was asked to name is favorite foreign leader in an interview Wednesday.

Reps: Clinton aides who got immunity deals directed email scrubbing

Fox News (Politics) - Wed, 09/28/2016 - 23:30
The tech specialist who scrubbed Hillary Clinton's email archive and was recently found to have sought help on Reddit for how to hide a certain "VIP's" email address was acting at the behest of Clinton aides Cheryl Mills and IT specialist Bryan Pagliano, a top House Republican charged Wednesday.

Frustrated Trump advisers pan him for lousy debate prep (anonymously)

Fox News (Politics) - Wed, 09/28/2016 - 23:15
Donald Trump believes he won the first presidential debate.

Jets owner, Hollywood producer, Wall Street titans helped drive Trump’s $18M day

Fox News (Politics) - Wed, 09/28/2016 - 23:15
The Donald Trump campaign’s massive $18 million, 24-hour fundraising haul this week was orchestrated by some of the biggest names in politics, Wall Street and philanthropy -- including New York Jets owner Woody Johnson and Hollywood producer Steve Mnuchin.

Congress rejects Obama veto of 9/11 bill, in first override of presidency

Fox News (Politics) - Wed, 09/28/2016 - 23:15
Congress on Wednesday overwhelmingly rejected President Obama’s veto of a bipartisan bill letting families of Sept. 11 victims sue the Saudi Arabian government, in the first successful veto override of Obama’s presidency.

Obama at UN last week: US too sovereign — Obama after landslide override of his 9/11 bill veto: It’ll make US less sovereign

Michelle Malkin - Wed, 09/28/2016 - 23:09

**Written by Doug Powers

Congress overrode an Obama veto for the first time, with the Senate voting 97-1 and the House voting 348-77 to go over the president’s head and make the 9/11 bill a law. Harry Reid was the one senator who sided with Obama, probably mostly because he’s not running for re-election anyway. But at least it’ll give him something to complain about in his remaining Senate days while he swats at imaginary flies with faces that look just like Charles and Fred Koch.

Here’s what struck me about all this: Just last week, Obama was telling the festival of globalist bureaucrats that the United States has too stop clinging to the notion of national sovereignty:

In his final speech to the United Nations General Assembly on Tuesday, President Barack Obama said the United States has to give up some freedom in exchange for security.

“We can only realize the promise of this institution’s founding to replace the ravages of war with cooperation if powerful nations, like my own, accept constraints,” Obama said.
[…]
“Sometimes I am criticized in my own country for professing a belief in international norms and multilateral institutions,” Obama told the assembly of foreign diplomats. “But I am convinced in the long run, giving up some freedom of action, not giving up our ability to protect ourselves or pursue our core interests, but binding ourselves to the international rules over the long-term enhances our security.”

After Congress overrode his veto Wednesday, Obama said it was a vote that will damage American sovereignty:

null

Maybe this is a clue why Obama is a sovereign immunity fan:

This principle is commonly expressed by the popular legal maxim rex non potest peccare, meaning “the king can do no wrong.”

Now it makes sense.

**Written by Doug Powers

Twitter @ThePowersThatBe

San Francisco Bay Area battle brewing over soda tax

Fox News (Politics) - Wed, 09/28/2016 - 23:01
The national fight over sugary soda is bubbling up in the San Francisco Bay Area, where voters in November will consider a tax on the drinks that many health experts say contribute to diabetes, obesity and tooth decay.

Congress passes stopgap government funding bill, $1.1B for Zika fight

Fox News (Politics) - Wed, 09/28/2016 - 23:01
Averting an election-year crisis, Congress late Wednesday sent President Barack Obama a bill to keep the government operating through Dec. 9 and provide $1.1 billion in long-delayed funding to battle the Zika virus.

Trump's Tax Returns--A Losing Hand That Needs to Be Played Today

TownHall Latest columns - Wed, 09/28/2016 - 22:35
Mr. Trump needs to disclose all of his tax returns or the key elements therefrom today. 2016-09-28T12:53:00-04:00 2016-09-29T03:35:04Z Hank Adler

And the Winner Is… Trump

TownHall Latest columns - Wed, 09/28/2016 - 22:35
As the debate turned to questions of race Monday night, Hillary Clinton, in an almost choreographed move, turned gravely serious, her countenance sullen, and her words slow and carefully chosen. Anything less would be political suicide, at least for the Democrats. 2016-09-28T10:44:00-04:00 2016-09-29T03:35:04Z Brion McClanahan

Obama Has Shed His Vanity. Just Ask Him.

TownHall Latest columns - Wed, 09/28/2016 - 22:35
Nothing oozes hubris like Barack Obama putting on a humble act. 2016-09-28T10:18:00-04:00 2016-09-29T03:35:04Z Jeff Jacoby

Remembering Shimon Peres, A Man of Wisdom

TownHall Latest columns - Wed, 09/28/2016 - 22:35
It is painful to declare it, yet it is true: at the age of 93, Shimon Peres is gone. 2016-09-28T10:16:00-04:00 2016-09-29T03:35:04Z Armstrong Williams

Trump’s Education Plan of Choice: Worth the Wait?

TownHall Latest columns - Wed, 09/28/2016 - 22:35
In finally rolling out his education plan September 8, Donald Trump once again proved to be the most unorthodox of presidential candidates. 2016-09-28T10:14:00-04:00 2016-09-29T03:35:04Z Robert Holland

The High Cost of Climate Cronyism

TownHall Latest columns - Wed, 09/28/2016 - 22:35
In Lewis Carrolls Through the Looking Glass, the sensible Alice notes to the odd White Queen that "One can't believe impossible things." The queen refutes Alice, telling her that she hasnt had enough practice, and sometimes the queen has believed as many as six impossible things before breakfast." 2016-09-28T10:08:00-04:00 2016-09-29T03:35:04Z Charles Sauer

Be Prepared: Gold Could Soar Quickly to $1750 or even $2000 with a Trump Win

TownHall Latest columns - Wed, 09/28/2016 - 22:35
2016-09-28T10:00:00-04:00 2016-09-29T03:35:04Z Mike Fuljenz

Vote Fraud and the Big Lie

TownHall Latest columns - Wed, 09/28/2016 - 22:35
Whether Trump or Clinton won their first bout, pundits will debate. 2016-09-28T09:22:00-04:00 2016-09-29T03:35:04Z John P. Warren

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